The court considered that to recognise such a duty would amount
to an extension of employers' previously recognised duties. It
unanimously concluded that it would not be "fair, just and
reasonable" to impose it – either as a standard implied
term in employment contracts or as a concurrent tortious duty.

In particular, given that the interests of an employer and
employee in such circumstances will often be in direct conflict,
the court considered that to impose such a duty would potentially
stifle an employer's defence of claims and would require it to
"constantly look over its shoulder" for fear of exposing
itself to claims by employees that the defence should have been run
differently.

The decision provides welcome reassurance for any employer (or
quasi-employer, as in this case) facing claims based on the alleged
wrongdoing of its employees, particularly where fraud or other
serious wrongdoing is alleged and there is potential for the
employees to face public criticism. Notably, the decision is not
limited to rejecting a particular formulation of the proposed duty
but appears to be a wholesale rejection of any suggestion that an
employer's general duty to its employees restricts it in any
way from defending such proceedings in whatever manner it thinks
best to serve its own interests.

Background

The underlying litigation concerned an allegation by a terrorist
suspect that he had been seriously assaulted in the course of his
arrest. He brought a personal injury claim against the Police
Commissioner as vicariously liable for the actions of the police
officers involved.

During the course of the trial, the Commissioner settled the
claim on terms that admitted most of the allegations and included a
public apology. The officers were subsequently charged with
criminal offences arising out of the arrest but were acquitted.
They then commenced proceedings against the Commissioner claiming
that both the manner in which the action was defended and the terms
on which it was settled had caused them economic, reputational and
psychiatric damage.

Amongst several bases relied on, the officers argued that the
Commissioner's common law duty of care as their employer or
quasi-employer (based on the accepted legal position that police
officers are in a quasi-employment relationship with the
Commissioner) included a duty to protect their interests in
conducting the litigation. Specifically, they relied on the analogy
of the standard implied term in employment contracts of mutual
trust and confidence between employer and employee, and the
recognised concurrent tortious duty to the same effect.

The High Court struck out all of the claims as unarguable. On
appeal, the Court of Appeal upheld the rejection of several of the
bases relied on but held that it was arguable (to the level
required to proceed to trial) that the Commissioner's general
duties as a quasi-employer did extend to protecting the
officers' economic and reputational interests in the conduct of
the litigation. (See our post on the Court of Appeal decision
here.)

Decision

The Supreme Court allowed the appeal, finding that no such duty
should be imposed.

The court proceeded on the basis that the question turned on the
scope of an employer's tortious duty, given that any implied
contractual term could not extend further than a concurrent duty in
tort. As to that tortious duty, the court accepted that to
recognise the duty for which the officers contended would amount to
extending an employer's duties beyond those established in
previous cases. Accordingly, it was necessary to consider the
question by reference to legal policy considerations. Specifically,
the court considered whether the imposition of such a duty met the
third limb of the test laid down in Caparo v Dickman
[1990] 2 AC 605 – that it be "fair, just and
reasonable" to impose the duty. (It was accepted that it was
clearly arguable the parties met the other two limbs, namely that
harm was foreseeable and that, by virtue of their quasi-employment
relationship, there was a sufficiently proximate relationship).

Key to the court's rejection of the duty was its observation
that there are "stark differences" between the interests
of an employer and its employees in such litigation. While it is
not necessarily fatal to the recognition of a duty that it would
give rise to conflicting duties, the court considered that the
extent of the conflict here strongly suggested that it would not be
fair, just or reasonable to expect an employer to protect the
interests of its employee in this situation. Further, the court
rejected as "unrealistic" a suggestion that the potential
for conflict could be overcome by recognising a duty of care up to
the time at which an actual conflict of interests arose, at which
point "timeous notification" by the Commissioner could
result in the duty of care ceasing to apply. The court considered
that the potential for conflict was too great to permit such a
compromise and there was no justification for imposing on an
employer the burden of keeping under review at each stage of the
proceedings the question whether an actual conflict had arisen.

The court was also influenced by policy considerations regarding
the practical conduct of proceedings. These included a perceived
risk that such a duty could inhibit the conduct of defences, result
in delays and disruption to proceedings (through disputes between
employees and employers as to the best way to conduct the defence
and through employers needlessly prolonging proceedings as a
protective measure), discourage settlement and prompt a
proliferation of satellite litigation, including challenges to the
outcome of decided cases.

Further, the court accepted that the practical impact on an
employer's legal professional privilege was an additional
factor weighing against the recognition of such a duty. In order to
defend proceedings brought by employees and demonstrate that there
was in fact no breach of duty, the employer might have to waive
privilege in relation to its conduct of the original claim. This
could, however, undermine the effective conduct of its defence of
that original claim, in that the possibility of a subsequent claim
in negligence and the likelihood of having to waive privilege could
well inhibit frank discussion between the employer and its legal
advisers. (Although the officers argued that common interest
privilege would have entitled them to access the Commissioner's
privileged material in any event, the court rejected this, noting
that something more than a shared interest in the outcome of
litigation is required before common interest privilege can be used
in this manner as a 'sword' against the owner of the
privilege.)

Comment

In summary, the decision is a clear and comprehensive rejection
of the suggestion that employers need to factor into their defence
of such litigation any requirement to protect or have regard to the
relevant employees' economic or reputational interests. In the
court's view, an employer in that situation "should be
entitled to defend the claim in the way he sees fit,
notwithstanding that his employees will or may as a result be
subjected to public criticism during the trial process".

It is important to note that the decision is not limited to
cases where the employer in question performs a law enforcement
role similar to that of the Commissioner, or even any other public
role. While the court did observe that the Commissioner's role
as a public officer "adds a further dimension to this
appeal", it seems clear from the judgment that this was noted
as merely adding weight in this case to the court's observation
that the interests of an employer and employee in vicarious
liability claims will often be in direct conflict. The balance of
the court's reasoning does not turn on the Commissioner's
public role and the conclusions are clearly expressed as applying
to employers and employees (or those in a quasi-employment
relationship) generally.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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